Whether you’re a small startup or a large corporation, you’re required to deduct a portion of an employee’s salary as tax (TDS) before it is credited to their bank account. But deducting the tax is only part of the responsibility, you also need to report these deductions to the government.
Now, how do you inform the ITD about the salaries you’ve paid and the amount of TDS you’ve deducted for each employee?
You do that by filing Form 138.
What is Form 138?
Form 138 is a quarterly TDS return that employers in India must file with the ITD. It provides details of the tax deducted at source from employees’ salaries.
Filing this return is mandatory for any entity that functions as an employer and deducts TDS on salaries exceeding the basic exemption limit.
This requirement applies to:
- Corporate entities such as private limited companies, public limited companies, and LLPs.
- Government offices, including central and state departments.
- Small businesses such as sole proprietorships and partnership firms.
- Non-profits & institutions like NGOs, trusts, schools, and hospitals.
Also, the employer must have a valid TAN (Tax Deduction and Collection Account Number) to file this form.
Once filed, the TDS details reflects in the employee’s Form 168 (Annual Information Statement), allowing them to claim the credit while filing their ITR.
What’s the format of reporting in Form 138?
The form is structured in two parts, each serving a different purpose throughout the year:
1. Annexure I (filed every quarter)
This section includes:
- Details of the employer (deductor) and employees (deductees)
- Challan details showing proof of TDS payment to the government
- A monthly breakdown of salary paid and tax deducted for each employee
2. Annexure II (filed only in Q4 - Jan to Mar)
This is the annual summary section. It includes:
- The complete salary breakup, including house rent allowance (HRA), perquisites, and deductions (under chapter VIII).
- Specifies whether the employee opted for the old or new regime.
This data is what eventually generates your Form 130.
What are the due dates for filing Form 138?
Depositing TDS and filing the return are two separate compliance steps, and each have a separate timeline.
1. Quarterly return filing
Since Form 138 is a quarterly return, it is required to be filed by the end of every quarter. Here’s the table with it’s due date:
| Quarter | Month covered | Due date |
|---|---|---|
| Q1 | April-June | 31st July |
| Q2 | July-September | 31st October |
| Q3 | October-December | 31st January |
| Q4 | January-March | 31st May |
2. Monthly TDS deposit
The TDS you deduct in a month must be deposited with the government by the 7th of the following month.
For example, if TDS is deducted in August, it must be deposited by September 7.
But there’s an exemption for the month of March, the deposit can be made up to April 30th.
These timelines ensure that salary deductions are both deposited and reported within the tax year.
What happens if you miss the deadline?
There are clear consequences if TDS isn’t deducted or reported through Form 138 on time:
1. Late filing fee
If the return isn’t filed by the due date, a fee of ₹200 per day applies until the date Form 138 is filed. However, the total fee cannot exceed the TDS amount for that quarter.
2. Interest on delay
If you fail to deduct TDS on time, interest of 1% per month or part of the month applies. And if you deducted TDS but did not deposit on time, interest of 1.5% per month applies from the date of deduction to the date of payment.
3. Additional penalty
If the delay extends beyond one year, or incorrect details are reported, the Assessing Officer may levy a penalty from ₹10,000 to ₹1,00,000.
To help you get familiar with the new layout and the payments it covers, we’ve linked the official draft below.
Draft Form 138.pdf (2.8 MB)
Questions? Let’s sort them out.